What is a pot trust? Should you have a pot trust in Texas?
A pot trust has nothing to do with marijuana or gardening.
There are many, many different kinds of trusts, and the “pot” trust is just one of those varieties. As a refresher, a trust is a document that lays out legal relationships among the person making the trust (called the “grantor” or “settlor”), the person in charge of the assets contained in the trust (called the “trustee”), and the people who benefit from the trust (the beneficiaries).
People have trusts for a million different reasons. One of the more common reasons to have a trust is to provide for minor children. That is, if the parents of a minor child die, the children cannot legally inherit the parents’ property outright. Should this happen, the local Texas probate court will likely have to set up a “guardianship of the estate” to give an adult the authority to accept the inheritance for the benefit of the child. This guardianship process can be expensive and/or burdensome. However, to alleviate this problem, parents can establish a trust for the benefit of minor children.
A trust for minor children in Texas is generally created in a parent’s Will (we call this a “testamentary trust”). A Texas estate attorney can customize and tailor this trust to meet each parent’s goals for the trust. For example, many parents don’t want the trust to simply give their kids a huge lump sum of cash automatically when the kids reach age 18. Instead, they structure the trust such that the trustee can spread out the distributions until the child reaches age 25 or beyond. This is especially useful to make sure the child has money to pay for a college education instead of wasting it on something else.
But what happens if both parents die with a trust, with one child age 18 and the other age 25. Let’s say the trust has $100,000. Let’s also say the 18-year-old is entering college and the 25-year-old has graduated college (and the parents paid for the college). Do the parents want the trust to give each kid $50,000? Split right down the middle–that seems fair, right?
It seems fair unless you’re the 18-year-old! She has to pay for her entire college education even though her older brother didn’t! This is where the pot trust is especially useful.
A pot trust puts all the parents’ assets into a single “pot” when the parents die. The trustee of this pot trust has the power to make distributions for the benefit of any and aii of the children. So, in our example, the trustee can pay the 18-year-old’s college tuition with the pot trust. Then, when the youngest child hits a certain age, the pot trust either terminates and gives the remaining money equally to the kids or spins off into separate trusts for the benefit of each child individually.
In short, a pot trust creates one large trust for the benefit of several people, which may be preferable over the creation of smaller individual trusts. To discuss which of the million varieties of trust is best for you and your family, talk to a Texas estate planning attorney.
Shutt Law Firm provides clients Trusts in Dallas, Trusts in Richardson, Trusts in Plano, and throughout the DFW area. Visit www.ShuttLawFirm.com for more information on Texas estate planning trusts.
Visit http://www.shuttlawfirm.com or email email@example.com. You can also call Mr. Shutt at (214) 302-8197 for more information on the topic discussed in this blog or to discuss a different legal matter. Phone-calls and quick e-mails are always free at Shutt Law Firm PLLC. Please consider the Shutt Law Firm if you’re looking for a Richardson probate lawyer, Richardson wills lawyer, Richardson estate planning attorney, power of attorney in Richarson, or Richardson guardianship lawyer.
DISCLAIMER: Nothing in this blog post constitutes legal advice. The information provided herein is merely provided in the spirit of education. If you have a legal question, you should consult an attorney for your specific legal situation. Further, nothing in this blog shall be construed to have started an attorney-client relationship. No such relationship exists until you sign an engagement letter with the Firm.